Is Mellanox Technologies, Ltd. (MLNX) Going to Burn These Hedge Funds?
There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Mellanox Technologies, Ltd. (NASDAQ:MLNX).
Mellanox Technologies, Ltd. (NASDAQ:MLNX) has experienced a decrease in support from the world's most elite money managers in recent months. MLNX was in 32 hedge funds' portfolios at the end of September. There were 36 hedge funds in our database with MLNX holdings at the end of the previous quarter. Our calculations also showed that MLNX isn't among the 30 most popular stocks among hedge funds.
If you'd ask most shareholders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are over 8,000 funds trading today, Our experts hone in on the crème de la crème of this club, around 700 funds. These hedge fund managers oversee bulk of all hedge funds' total asset base, and by tracking their top stock picks, Insider Monkey has revealed a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let's review the latest hedge fund action regarding Mellanox Technologies, Ltd. (NASDAQ:MLNX).
What does the smart money think about Mellanox Technologies, Ltd. (NASDAQ:MLNX)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MLNX over the last 13 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Mellanox Technologies, Ltd. (NASDAQ:MLNX) was held by Starboard Value LP, which reported holding $326.3 million worth of stock at the end of September. It was followed by Rima Senvest Management with a $145.9 million position. Other investors bullish on the company included Renaissance Technologies, Jericho Capital Asset Management, and Sandler Capital Management.
Seeing as Mellanox Technologies, Ltd. (NASDAQ:MLNX) has witnessed falling interest from hedge fund managers, logic holds that there was a specific group of hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, Glenn Russell Dubin's Highbridge Capital Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $8.7 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund said goodbye to about $8.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Mellanox Technologies, Ltd. (NASDAQ:MLNX) but similarly valued. These stocks are Immunomedics, Inc. (NASDAQ:IMMU), Virtu Financial Inc (NASDAQ:VIRT), Hawaiian Electric Industries, Inc. (NYSE:HE), and MB Financial, Inc. (NASDAQ:MBFI). This group of stocks' market caps resemble MLNX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMMU,30,944645,-3 VIRT,14,72947,-6 HE,11,117755,1 MBFI,13,237887,-3 Average,17,343309,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $343 million. That figure was $846 million in MLNX's case. Immunomedics, Inc. (NASDAQ:IMMU) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Mellanox Technologies, Ltd. (NASDAQ:MLNX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
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